Saturday, December 31, 2005

Singapore's Best Motivator - Malaysia's GLCs

The horrendous mis-steps by a few GLCs exemplify what is sorely lacking in our top management. We must be doing something wrong, either the incentives are not lucrative enough, or the punishment meted out is nothing to shout about, or our top people are not really that good professionally - or all of the above. This is a fair statement, I believe. Rather than cringe at the message, please do something constructive with the experience, if the ones that matter are reading this.

SIA makes good profits in their current FY, compare that to MAS. Telekom is ambling along, about 10 years behind SingTel in overseas ventures. Singapore produces ZERO number of cars, their COEs makes more money than Proton. Singapore has almost all but closed out their steel operations, one can import them, cheaper than the price set by the government in Malaysia to support the local steelmakers.

If we were to generalise, Malaysians are great dreamers, strategists... but poor executors. The MSC, brilliant, the execution could be a lot better. Why the gap? Mainly because failing is not a very big thing in Malaysian corporate world. There has always been bailouts. Your professional management career is not terminated, you still get cushy job placements elsewhere. You do not really need solid proven experience to rise to the top. Is it any wonder then that we fail so often.

In the meeting rooms of top Singapore companies, they probably don't need Stephen Covey material to motivate them. Their mantra would be "Look, if you don't want to be like the Malaysian GLCs, you better buck up". That probably will scare the be-jeezzzuss out of the kiasu Sinagporeans.

The corporate environment is not a place to make money just because you know somebody. You have to prove yourself. As long as we keep nominating top positions to priviledged people and not to capable ones, we are doomed to repeat the same mistakes. Again, .... and again.... and again...

Friday, December 30, 2005

How To Make A Bad Thing Worse - PROTON

Tourists always head to Petaling Street when they come to Malaysia. No need to go to Petaling Street, KLSE also can. Well, getting something lelong for ONE Euro probably takes the chapati, and after only buying it for a year! We all know that it was an investment which turned sour, and Proton's management has already written down the book value, and that one Euro was just a token as it will stop the rot (share of losses and liabilities) on Proton's books. Just take the pill and lie down, wait till you get better.

Now, why would the spokesman want to come out a few days later and blurt out in a headliner "PROTON TO RECORD NO LOSS ON DISPOSAL". As if now, we will go aaahhhh, actually sell something for one Euro also can have zero losses, so smart lah Proton!! What are we,....... idiots??


The actual announcement as reported in The Edge Daily:

Proton Holdings Bhd does not expect any gain or loss from its proposed disposal of the 57.75% stake in MV Agusta Motors SpA as the carrying value of the investment was nil.

Proton said on Dec 29 that based on the audited accounts of MV Agusta for the 15-month period ended March 31, 2005, the net loss after tax and extraordinary income of MV Agusta was 29 million euros (RM128 million).

In its reply to Bursa Malaysia Securities Bhd's query, Proton said its share of the net losses amounted to 16.75 million euros.

It said that MV Agusta’s net liabilities for the same period were 46.53 million euros and Proton’s share of that amount was 26.87 million euros.

Proton said the proposed disposal was expected to be completed by Feb 28 next year.

Its already a bad thing, just let sleeping dogs lie. I don't know who your PR team is, but that is sooooo baadd. DON'T TRY TO PUT A POSITIVE SPIN ON A BAD THING!!! Imagine a convicted rapist shouting out to the crowds, "But she didn't get pregnant , what!!!".

Thursday, December 29, 2005

T+7.... Fears, Myths & Benefits

Some people were aghast at the Bursa for allowing broking firms to offer T+7 facility to their clients. Are we luring back the risks of the early/mid 90s? Here's my take:

T+7 is no big deal. In actual fact, Maybank Securities offered an even better T+10 back in, wait for it, August 2003. Mayban Securities introduced T+10 facility, a short-term financing facility, which provides longer contra period. Collateral requirement, margin calls and force-selling terms remained the same but the extra days for the transaction would be free from contra charges. Besides Mayban Securities, TA Securities Bhd and Botly Securities Sdn Bhd had also introduced a T+6 settlement facility.

Extending contra period will not add substantial risk to the market. Whether it is T+7 or T+10, the risk is mitigated as all brokers will have their clients come up with some form of collateral/deposit. Unlike the days back in early/mid 90s when you can actually buy RM100,000 worth of stocks from each of your 3 remisers with zero collateral on a job thay pays you RM3,000 a month. Go figure!!! Of course we were doomed to be bloated, filled with hot air, waiting for a prick to come along (pardon the pun)! This extension thing is just another form of financing, and believe you me, it is cheaper than the rates you pay for carrying on the credit amount on your credit card. So, in actual fact, we are not going back to those heady days. Even if a person were to go crazy, he would still have to come up with some form of collateral, probably 30%-50% of what his overall exposure is. There will be certain stocks that the brokers will declare as off-limits for financing every now and then if speculation gets too heady. The conservative brokers will also have price limits on certain stocks for financing. So many have learnt their lesson, its a good move, not a silly one.

A necessary bull market instrument. T+7 or T+10 are only good when their is a bullish sort of market. When it was flat like the last 12 months, nobody will use it much. You only want to gear up when there is a bull run. In a normal market, you'd be lucky to get two short bullish periods a year, usually lasting 3-6 weeks each time, so go figure.

Brokers leveraging earnings. Brokers offering this facility should appear on your BUY list whenever a bull run comes around as they will be able to leverage on the earnings platform.

Wednesday, December 07, 2005

KUL-SIN - Why Are We (Still) Subsidising The Two Airlines???

Malaysia announced yesterday that it will not allow more Kuala Lumpur-Singapore shuttle flights ahead of the Asean "open skies" policy which will come into effect in 2008. As reported in The New Straits Times (6/12/05). Malaysia is not in favour because the benefits accruing to MAS from liberalising the route will be limited, according to the authorities.

"SIA and possibly SilkAir will be able to fly to Kuala Lumpur and several other destinations in Malaysia when all present restrictions on passenger flights between Asean capital cities are lifted by 2008.

"But for MAS, Singapore will remain just one destination. The benefits derived from liberalisation will not be the same.

"Under the circumstances, Malaysia has no choice but to stick to the present schedule of the KL-Singapore shuttle flight," said a transport ministry official here.

MAS operates 14 flights a day, and SIA, which operates 12 flights, will sustain the virtual joint monopoly to account for 182 of the 213 weekly flights. That's 85% of the market share for the KL-Singapore route. We don't really care about the open skies thing. This monopoly has been going on for way too long. Even toll bridges have an expiry date for collecting tolls. Nowadays, fares for flying to Bangkok, Bali, Phuket are even cheaper than flying between the two countries. Where is the justification?? Already Malaysia and Singapore are among the two places on earth that prices cars most expensively (I'm sure we are in top 10 if not the top 5 countries).

Both airlines operate a total of 26 flights a day. The pricing is dampening real demand. If we were to liberalise the market, we could see return fares plummeting to RM250 at least - the drop would be more than compensated by the jump in traffic. At RM250 return, I think the daily traffic should easily triple on conservative estimates (just have a look at the number of buses traveling to-and-fro between the two countries on a daily basis).

If the Transport Ministry say that there is no real benefits accruing to MAS, what about the benefits for Malaysians in general? You can still keep the monopoly, but just agree to price it cheaper, say RM350 return - its more than a fair price as the load factors for the KUL-SIN almost surpass 90% for every flight anyway!!! Certainly we cannot save the red ink for MAS just from the subsidy of this KUL-SIN sector!!??

Ipoh to the rescue. As reported in The Star today (7/12/05), the under-used Sultan Azlan Shah Airport here is set to be a low-cost carrier hub with AirAsia introducing flights from Senai to here in February. Datuk Tony Fernandez said the airline would begin operations on Feb 1, with 4 Senai-Ipoh flights a week. “We will increase to a daily flight frequency when we take delivery of our A320 Airbus by the end of March,” he said, adding that the Boeing 737 aircraft would initially be used for the sector. Fernandez said flights to the airport would boost economic development in the city and its surrounding areas. “We also believe that with the help of the minister and the mentri besar, the airport can be developed into a northern low-cost hub complementing the KL International Airport,” he said, adding that the flights would attract more tourists to the city. To a question, Fernandez said AirAsia may fly to Indonesia, Thailand, Sabah and Sarawak from Ipoh.

“We are considering a state proposal to turn the airport into a low-cost hub,” said Chan, who is also MCA deputy president. On calls to increase facilities at the airport, Chan said it would depend on the routes AirAsia wanted to create. Tajol Rosli said AirAsia would “breathe some life” back into the airport.

Concluding Comments - I think this is a brilliant idea. Ipoh's airport has been way under-utilised due to the popularity of the Nort-South Expressway. By making it the low cost carrier hub, it will generate enormous traffic. As it is, it takes a KL person about 1 hour - 1.5 hours to get to KLIA, a bit faster if they take the KLIA Express train. It takes 2 hours to get to Ipoh. Let's be smart here and make parking at Ipoh airport free, that way travellers can leave their cars in Ipoh and travel to wherever they want without incurring high parking charges. Ipoh is an ideal catchment area for people from Penang and even KL.

The move should be a highly successful one for all concerned (except MAS) and would also prove a trigger to accelerate the opening up of routes for all carriers. Hey, KL-Sin is still at RM650 return, I think RM200 return Ipoh-Senai would be highly attractive, plus I can get a taste of the the good food in Ipoh before embarking on my flight... that's Malaysia... Truly Asia!